TMI Tax Updates - e-Newsletter
August 29, 2012

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. Service Tax on Construction activity- Part-I

   By: RadheyShyam Mangal

2. DEDUCTION FROM GRATUITY, TOWARDS DISCHARGE OF A BANK LOAN GIVEN TO AN EMPLOYEE, IS ILLEGAL

   By: DR.MARIAPPAN GOVINDARAJAN

3. WEALTH TAX – SOME NEW THOUGHTS – link basic exemption to inflation and provide limited specified exemptions with certain limits to impose tax on assets above limits.

   By: DEVKUMAR KOTHARI

4. DENIAL OF EMPLOYMENT AMOUNTS TO RETRENCHMENT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. First ASEAN-FTA Partners meet to discuss Regional Comprehensive Economic Partnership Anand Sharma Leaves for Siem Reap.

2. Export of Agri-Products.

3. Shelters for Salt Workers.

4. Trade with Canada.

5. Export of Wheat.

6. Multi-Level Marketing Companies.

7. Extra Judicial Powers of SFIO.

8. Finance Minister to Address Chief Commissioners/DGs of Customs, Excise & Service Tax Tomorrow.

9. FM’s Statement.

10. 9th Session of India-China Joint Economic Group on Monday Anand sharma and Chen Deming to lead the Delegations

Notifications

Customs

1. 39/2012 - dated 24-8-2012 - ADD

Amends Notification No.094/2007-Customs - Anti-dumping on import of nonylphenol.

2. 78/2012 - dated 27-8-2012 - Cus (NT)

Joint Commissioner or Additional Commissioner of Customs, Custom House, Cochin, to exercise the powers and discharge the duties as adjudicating authority over the powers and duties.

3. 77/2012 - dated 27-8-2012 - Cus (NT)

Joint Commissioner or Additional Commissioner of Customs (Import), Jawaharlal Nehru Custom House, Nhava Sheva, to exercise the powers and discharge the duties as adjudicating authority over the powers and duties.

4. 76/2012 - dated 27-8-2012 - Cus (NT)

Amends Notification No. 40/2012-Customs (N.T.) - Regarding Issue of ‘proper officer’ under the Customs Act, 1962.

Circulars / Instructions / Orders

Service Tax

1. 164/15/2012-ST - dated 28-8-2012

Service tax – vocational education/training course -- regarding.

Highlights / Catch Notes

Income Tax

• Unabsorbed depreciation from 1997-98 can be carried forward beyond eight years under amended Section 32, Finance Act 2001.

  Case-Laws - HC : Treatment for Unabsorbed depreciation pertaining to A.Y. 1997-98 - allowed to be carried forward and set off after a period of eight years OR governed by Section 32 as amended by Finance Act 2001 - HC
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• Section 194 TDS Not Required on Advances as Deemed Dividends to Non-Shareholders u/s 2(22)(e.

  Case-Laws - AT : TDS in respect of the advances held as deemed dividends u/s 2(22)(e) – Section 194 does not require TDS when payment is made to a non-shareholder. - AT
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• Mutual Society Loses Charitable Status Due to Member-Focused Benefits and Contributions Under Income Tax Laws.

  Case-Laws - AT : Charitable purpose – whole idea of this mutual society is that the particular members comprising it should be benefited out of their own contribution - assessee society is not a charitable society - AT
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• Income Tax Act: Preventing Dual Deductions u/ss 10B and 80HHF to Maintain Tax System Integrity.

  Case-Laws - AT : Deduction u/s. 80HHF and u/s. 10B - express intention of Legislature with regard to sections 10B and 80HHF is not to allow deduction under both sections - AT
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• Capital Gains Case: Municipal Tax, Land Conversion, and Cess Tax Not Considered Improvement Expenses for Assets.

  Case-Laws - AT : Capital gain – Expenses claimed as cost of improvements are Municipal tax, Land conversion and Mandal development cess tax, which cannot be said to be expenditure incurred for the improvement of or addition to the asset. - AT
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• Income from Storage Charges Not Part of Business Activities; Section 80IB Deduction Denied Due to Contract Delivery Failure.

  Case-Laws - AT : Source of income with regard to storage charges was not business of assessee, but was failure of buyer to receive delivery of goods in compliance with terms of contract - deduction u/s 80IB not allowed - AT
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• Compensation from joint venture agreement surrender is taxable as revenue receipt, not capital, with no income source impairment.

  Case-Laws - AT : Capital receipt or revenue receipt - receipt of compensation under JV agreement - surrender of certain rights - there as no impairment of source of income - taxable as revenue income - AT
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• High Court examines taxation of slot charter income under India-UK DTAA, focusing on Section 44B vs. Sections 28-43.

  Case-Laws - HC : India-UK DTAA - income on account of slot chartering - taxable u/s 44 B OR 28 to 43 - Article 9 of the Indo-U.K. DTAA includes slot charters/slot hire agreements as availed of and utilized in these cases - HC
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• Registration u/s 12A/12AA is distinct from assessment u/ss 11, 12, and 13.

  Case-Laws - AT : It is well settled legal proposition that the registration proceedings u/s 12A r.w.s. 12AA are not to be confused with the assessment proceedings wherein the provisions of section 11, 12 and 13 are applicable - AT
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• Court Examines Whether Lessee's Income Qualifies as Business Income or Income from House Property Under Tax Law.

  Case-Laws - AT : Operational income received from lessee - business income OR house property? - There is nothing on record to suggest that the assessee has exploited the IT Complex as a business venture. - AT
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• Self-Made Vouchers as Evidence for Additions u/s 68 of the Income Tax Act: A Practical Solution.

  Case-Laws - AT : Addition u/s 68 - It would not generally be possible to obtain bills from agriculturists and therefore, the best that could be done in such circumstances was to have self-made vouchers. - AT
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• Embroidery Work on Cloth Qualifies for Manufacturing Deductions u/s 80IB of the Income Tax Act.

  Case-Laws - AT : Deduction u/s 80IB – embroidery work on cloth. - held as manufacturing activity eligible for deduction - AT
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Customs

• Importers Must Affix MRP on Barcode Printers, Subject to Additional Customs Duty u/s 3 of Customs Tariff Act.

  Case-Laws - AT : Import of Barcode Printers - additional duty of customs under Section 3 of the Customs Tariff Act - whether the appellant are required to affix MRP – held yes - AT
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• Amendment to Notification No. 094/2007-Customs: Updated Anti-Dumping Duties on Nonylphenol Imports to Protect Domestic Industries.

  Notifications : Amends Notification No.094/2007-Customs - Anti-dumping on import of nonylphenol. - Notification
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• Export Ban on Wooden Furniture Parts from Sawn Timber Under Foreign Trade Policy Challenged Due to Good Faith Misunderstanding.

  Case-Laws - AT : Export of wooden furniture components - sawn timber - prohibited for export under the Foreign Trade Policy - respondents had a bona fide belief that the subject goods can be legally exported as furniture parts - AT
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• Customs Act Update: Amendment Defines 'Proper Officer' for Clear Authority in Customs Procedures under Notification No. 40/2012-Customs (N.T.

  Notifications : Amends Notification No. 40/2012-Customs (N.T.) - Regarding Issue of ‘proper officer’ under the Customs Act, 1962. - Notification
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• Jawaharlal Nehru Custom House Official Appointed as Adjudicating Authority for Imports at Nhava Sheva Port.

  Notifications : Joint Commissioner or Additional Commissioner of Customs (Import), Jawaharlal Nehru Custom House, Nhava Sheva, to exercise the powers and discharge the duties as adjudicating authority over the powers and duties. - Notification
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• Customs Authority at Cochin: Joint and Additional Commissioners Granted Adjudicative Powers to Oversee Duties and Responsibilities.

  Notifications : Joint Commissioner or Additional Commissioner of Customs, Custom House, Cochin, to exercise the powers and discharge the duties as adjudicating authority over the powers and duties. - Notification
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Corporate Law

• Unregistered Company Charge Deemed Void in Winding Up Proceedings u/s 125 of Companies Law.

  Case-Laws - HC : Winding up proceedings - charge against the property was created but registered - held that charge is void and would be governed by section 125 - HC
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Service Tax

• Market Research Not a Management Function for Tax Purposes; Each Service Must Be Separately Taxed Accordingly.

  Case-Laws - AT : Market Research may help in Management for that reason the activity of Market Research cannot be classified as Management function when both services are separately taxable - AT
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• V-SAT Connectivity Charges Not Classified as Lease Circuit Services Under Service Tax Regulations.

  Case-Laws - AT : Demand in respect of V-SAT connectivity - V-SAT connectivity charges being recovered by the appellant from their customers and sub-brokers cannot be treated as charges for lease circuit services - AT
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• Vocational Education and Training Courses Exempt from Service Tax if Recognized by Law or NSDC-Affiliated Institutions.

  Circulars : Service tax – vocational education/training course -- regarding. - Circular
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• Service Providers Entitled to Tax Benefits for Meter Installation Under Notification No. 45/2010-ST.

  Case-Laws - AT : Services provided in respect installation of meters at the premises of electricity consumers - claim of benefit of Notification No. 45/2010-ST allowed - AT
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• Cenvat Credit Claim is a Substantial Right, Not Denied by Impractical Procedural Requirements in Service Tax Reverse Charge Case.

  Case-Laws - AT : Cenvat credit of ST paid under reverse charge - claim for Cenvat credit being a substantial right it cannot be denied on the basis of procedures which cannot be implemented in the facts of the case - AT
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• Cenvat Credit Eligibility for Transit and Group Health Insurance Services Examined Under Input Services Tax Rules.

  Case-Laws - AT : Cenvat Credit of service tax paid on Transit Insurance and Group Health Insurance Policy services - input service - AT
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Central Excise

• Steel Tubular Poles Made from Pipes Constitute a New Product, Qualifying as Manufacturing Under Excise Laws.

  Case-Laws - AT : After the processing pipe/tube a distinct product comes into being which is known in the commercial parlance as steel tubular pole which has character and was distinct from MS black Tube/pipes. - This process amounts to manufacture - AT
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• Glazing System Installation: Attaching Aluminum Sections and Glass Securing with Silicon Classified as Manufacturing Under Central Excise.

  Case-Laws - AT : Aluminium structurals - The entire process of fixing the glazing system is done by fixing the aluminium section on the brackets and by sticking the glass using silicon. - held as manufacture - AT
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• Penalty Ruling: Firm Liable, Partners Exempt from Penalties in Joint Cases.

  Case-Laws - AT : Demand – personal penalty – penalty is sought to be imposed not only on the firm but also on the partners which is clearly not permissible- AT
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• Manufacturer's Name on Packaging Doesn't Affect SSI Exemption Status Under Central Excise Laws.

  Case-Laws - AT : SSI Exemption - Whether indicating the name of the manufacturer on the packaging of the product would amount to affixing a brand name or not - held no - AT
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Case Laws:

• Income Tax

• 2012 (8) TMI 714
  Reassess income/recompute loss/ depreciation allowance - notice under Section 148 - directions from Dispute Resolution Panel (DRP) - writ petition - Held that:- Writ petition under Article 226 of the Constitution of India is maintainable where no order has been passed by the AO deciding the objection filed by the assessee u/s 148 and assessment order has been passed or the order deciding an objection u/s 148 has not been communicated to the assessee and assessment order has been passed or the objection filed has been decided along with the assessment order, thus it was not open to the AO to decide the objection to notice under section 148 by a composite assessment order - AO was required to, first decide the objection of the assessee filed u/s 148 and serve a copy of the order on assessee. And after giving some reasonable time to the assessee for challenging his order, it was open to him to pass an assessment order. This was not done by the AO, therefore, the order on the objection to the notice u/s 148 and the assessment order passed under the Act deserves to be quashed - in favour of assessee. Re-opening of assessment - non application of provisions of Section 32(2) by AO - Held that:- Once the AO notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever, therefore,that in a situation where the AO during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reason for not making addition - If on the facts disclosed by the assessee, a wrong legal inference is taken by the AO at the time of original assessment then it would not confer any power on him u/s 147 to commence reassessment proceedings - in favour of assessee. Treatment for Unabsorbed depreciation pertaining to A.Y. 1997-98 - allowed to be carried forward and set off after a period of eight years OR governed by Section 32 as amended by Finance Act 2001? - Held that:- Any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever - writ petition allowed in favour of assessee.

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• 2012 (8) TMI 713
  Claim of Depreciation on Stock Exchange Membership Cards - Held that:- As decided in M/s Techno Shares & Stocks Ltd. Versus CIT IV [2010 (9) TMI 6 - SUPREME COURT OF INDIA] by virtue of Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a "licence" or "franchise" is declared to be an intangible asset, therefore, the right of membership, which includes right of nomination, is a "licence" or "akin to a licence" which is one of the items which falls in Section 32(1)(ii) of and the Tribunal was right in holding that depreciation was allowable on the cost of the membership card - in favour of assessee. Claim of Depreciation on goodwill - Scheme of Amalgamation - Held that:- Explanation 3 states that the expression `asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words `any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression `any other business or commercial right of a similar nature' - in favour of assessee. Cancellation of disallowance of bad debt - Held that:- Bad debt claimed by the assessee was incurred in the normal course of business and, therefore, the assessee was entitled to deduction u/s 36(1)(vii)- the manner in which the assessee maintains its accounts is not conclusive for deciding the nature of expenditure - in favour of assessee.

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• 2012 (8) TMI 712
  Disallowance of reconciliation loss - whether the said figure of 3.46% of the purchases did or did not include gas in the pipeline ? - Held that:- As AO following the directions of the Tribunal furnished for this year accordingly restored the matter to the file of the AO for this year also ignoring a clear finding that loss of about 4% of purchases is reasonable subject to verification - As the loss of 3.4% is borne out by audited accounts, which is lower than the average loss of about 4%. Therefore, there seems to be no reasonable cause to make the disallowance of reconciliation loss by stating that the details of stock lying in pipe lines were not furnished in qualitative or quantitative terms as what had to be verified was whether the loss was in the vicinity of 4%, which has been held to be reasonable by the Tribunal. The matter be remitted to the AO for the purposes of determining / verifying as to whether gas in the pipeline in respect of the assessment year 2005-2006 has been included in the figure of closing stock or not. If the Assessing Officer finds that there is gas in the pipeline, which has not been included in the closing stock, to that extent, the same shall be added back to the closing stock and insofar as the figure of 3.46% of the purchases is concerned, the same shall be modified accordingly.

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• 2012 (8) TMI 711
  Receipt of rent and compensation - Business income OR Income from House Property - the period of lease exceeding 12 years - revenue invoking the provisions of section 27(iiib) r.w.s. 269 UA(f) - Held that:- By an agreement dated 7th November, 1984 HLL granted the assessee a licence in respect of an area admeasuring about 450 square meters on the term of not entitled to renew the same upon the expiry of the period of 11 years from the date of the occupation certificate of the shopping arcade - As the assessee and HLL entered into a fresh agreement dated 24th January, 1999 for a duration of this agreement was 10 years with enhanced consideration, no connection whatsoever between the two agreements can be developed - no indication of any factors on the basis of the agreements or even otherwise which would indicate that the latter agreement was a continuation of the first agreement - as neither the assessee nor HLL had a right to renew the first agreement this is the clearest indication that the subsequent agreement was separate and distinct and was entered into on the basis of fresh negotiations. As the first agreement was entered into on 7th November, 1984 before the provisions of Section 27(iiib) and 269UA(f) came into force with effect from 1st April, 1988 and 1st October, 1996, respectively, thus it cannot, therefore, be said that the agreement was structured by the parties thereto to get over the said provisions - thus the rental income is need to be held under the head “Profits and gains from business” - in favour of assessee.

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• 2012 (8) TMI 710
  Disallowance of Bad debt on 'vatav kasar' - assessee is a stock and share broker - assessee contended that even if the deduction is not allowable as bad debts,the aforesaid amount of Rs.44.98 lacs should be allowed as a business loss in computing the profits and gains earned in carrying on a business - Held that:- The expression “Profits and gains of business or profession” u/s 28 is to be understood in its ordinary commercial meaning and the same does not mean total receipts. What has to brought to tax is the net amount earned by carrying on a profession or a business which necessarily requires deducting expenses and losses incurred in carrying on business or profession. As decided in Badridas Daga Versus CIT [1958 (4) TMI 2 - SUPREME COURT] if the deduction is not allowable as bad debts, the Tribunal ought to have considered the assessee's claim for deduction as business loss - The fact that condition of bad debts were not satisfied by the assessee would not prevent him from claiming deduction as a business loss incurred in the course of carrying on business as share broker - in favour of the assessee

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• 2012 (8) TMI 709
  Disallowance of exemption u/s. 10A - unit of assessee at SEEPZ Mumbai - reopening of assessment u/s 147 - Held that:- As decided in CIT Versus Paul Brothers [1992 (10) TMI 5 - BOMBAY HIGH COURT] where a benefit of deduction is available for a particular number of years on satisfaction of certain conditions under the provisions of the Income Tax Act, then unless relief granted for the first assessment year in which the claim was made and accepted is withdrawn or set aside, the Income Tax officer cannot withdraw the relief for subsequent years. More particularly so, when the revenue has not even suggested that there was any change in the facts warranting a different view for subsequent years. In this case for the assessment years 2000-01 and 2001-02 the relief granted u/s 10A to SEEPZ unit has not been withdrawn and there is no change in the facts which were in existence during the assessment year 2000-01 vis a vis the claim to exemption under section 10A. Therefore, it is not open to the department to deny the benefit of Section 10A for subsequent assessment years i. e. assessment years 2002-03 and 2003-04 and 2004-05 - no need to reopen the assessment - in favour of assessee.

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• 2012 (8) TMI 708
  Applicability of TDS provisions in respect of the advances held as deemed dividends by the AO u/s 2(22)(e) – advance provided to sister concern in which share-holders of the assessee are having substantial interest of more than 20% by way of shares – legality and validity of the proceedings u/s 201(1) and 201(1A) after lapse of a period of four years – Held that:- As far as trade advances are concerned, there is no question of applicability of the provisions of S.194, and consequently, applicability of provisions of S.201(1) and S.201(1)(1A) does not arises. As for the other advances as well, it is held that it is only where the payee in relation to the payments in question is a share-holder, such payments may attract the provisions of S.2(22)(e), and consequently liability to TDS u/s 194. Therefore, Section 194 does not require TDS when payment is made to a non-shareholder. See ANZ Reality Pvt. Ltd. V/s. ITO(2008 (10) TMI 268 - ITAT JAIPUR-B) – Decided in favor of assessee. For the purpose of applicability of TDS provisions, six years is held to be a reasonable period. See Mahindra and Mahindra Limited V/s. DCIT (2009 (4) TMI 207 - ITAT BOMBAY-H) – Decided in favor of Revenue

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• 2012 (8) TMI 707
  Alleged Bogus payments made for purchase of Plant and why the assessee, the Managing Partner issued such cheques. Therefore, role and innocence of the assessee in discharging the onus is not fully demonstrated. Also, employing the short lived bank accounts of other two concerns, whose antecedents are not verifiable have added fuel to the fire. We restore the matter to the file of the AO for re-consideration of the whole issue, after carrying due verification with a direction to obtain relevant confirmation from supplier of P&M about supply of the P&M and receipt of the agreed amount of consideration

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• 2012 (8) TMI 706
  Suppression of Sales - retail trade in liquor – AO on observation of GOMS of the Govt., of AP and retailer’s margin, reworked sales based on MRP fixed - addition made for suppression of sales, deleted by CIT(A) on ground that MRP fixed by the Government may be an indicator for knowing the general price of the product but the same cannot be considered as the price for which the sales were effected by the assessee – Revenue contesting the same on various grounds including that TDS & TCS rate of 1% fixed in liquor trade if adopted would render net profit margin to be in excess of 5% - Held that:- In view of aforesaid and various other submissions of Revenue, we set aside the order of the CIT(A) and direct the AO to estimate net profit at 5% of the purchases or stock put for sale during the year subject to the assessed income not less than returned income – Decided partly in favor of Revenue.

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• 2012 (8) TMI 705
  Best judgement assessment - estimation of profit @ 8% u/s 44AD - further addition made of concealed contract receipts not reflected in the regular books of account maintained and unexplained investment u/s 69B utilized to pay wages to workers/labourers - Held that:- W.r.t. addition on ground of concealed contract receipts, assessee contended that same has been received in the following year after deduction of tax at source. TDS certificates and bank statements placed on record. Therefore, the AO is directed to accept the gross contract receipts as declared by the assessee. Further, once the NP rate having been applied no other addition on account of wages or contract receipts as mentioned hereinabove can be a subject matter of addition. AO is directed to exclude the said amounts - Decided in favor of assessee

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• 2012 (8) TMI 704
  Registration u/s 12AA - denial on ground of it being non-charitable - assessee trust created for health and medical education - assessee contended that the scope of inquiry by CIT is only to examine the genuineness of the objects of the trust and not application of income for charitable purpose, which can be examined at the stage when the trust files its return - Held that:- Tests for registration which have to be applied are (i) whether the activities of the society are genuine, and (ii) whether the purpose of the society is charitable. Therefore, assessee had satisfied the conditions for registration u/s 12AA because the activities of the assessee-trust are genuine and purpose of the assessee-trust is charitable. CIT-II directed to grant registration to the assessee-trust - Decided in favor of appellant

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• 2012 (8) TMI 703
  Depreciation on windmill - dis-allowance of claim of higher depreciation @ 80% on ground that assessee has not exercised option as per proviso to Rule 5(1A) before the due date of filing the return of income u/s 139(1) for the relevant AY in which generation of power had begun - Held that:- CIT(A) has not passed speaking order giving detailed reasons for allowing the appeal of the assessee. Moreover, the AO in his assessment order has also taken contradictory stand with respect to the business of the assessee. In our considered opinion, the order of the CIT(A) is liable to be set aside and the matter requires to be remanded back to the AO to decide the matter afresh after taking into consideration facts of the case and submissions of the assessee.

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• 2012 (8) TMI 702
  Penalty – penalty imposed u/s.271(1)(c) in respect of denial of deduction u/ss 10A/10B on such interest income – Held that:- Similar penalty was initiated by the Revenue in respect of asstt. year 2003-04 also - AO got satisfied as to the non-levy of penalty and dropped the same – In favor of assessee

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• 2012 (8) TMI 701
  Registration under section 12A/12AA – Held that:- Society can be held to be "charitable" there must be an element of charity to public at large - society under consideration is a mutual concern of the members who form the society and the whole idea of this mutual society is that the particular members comprising it should be benefited out of their own contribution - assessee society is not a charitable society within the meaning of the Act so that registration under section 12A/12AA can be granted - appeal of the assessee is dismissed.

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• 2012 (8) TMI 700
  Disallowance of expense u/s 40(ia) of the Income Tax Act – Held that:- Assessee has deducted tax at source u/s 194C whereas according to the Assessing Officer provisions of section 194I are applicable - assessee is in default as per provisions of sec. 201 but disallowance of the expenditure is not permissible u/s 40(a)(ia) - appeal filed by the assessee is allowed.

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• 2012 (8) TMI 699
  Disallowance of provision for bad and doubtful debts – Held that:- Deduction for bad debt(s) can be allowed only if the debt is written off in the books as bad debt - But in the case of rural advances, a deduction would be allowed even in respect of a mere provision without insisting on an actual write off - proviso indicates that it is limited in its application to bad debt(s) arising out of rural advances of a bank. It follows that if the amount of bad debt(s) actually written off in the accounts of the bank represents only debt(s) arising out of urban advances, the allowance thereof in the assessment is not affected, controlled or limited in any way by the proviso to clause (vii) - in favour of the assessee Decision in the case of Catholic Syrian Bank Ltd. vs CIT (2012 (2) TMI 262 - SUPREME COURT OF INDIA) followed.

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• 2012 (8) TMI 698
  Deduction u/s. 80HHF in addition to treating an amount as exemption u/s. 10B of the I.T. Act by applying the provisions of Section 80HHC to the export turnover - While computing deduction under section 80HHF it included export profit of EOU Held that:- Profit derived from EOU should be reduced because profit derived by EOU was exempt from tax under section 10B – express intention of Legislature with regard to sections 10B and 80HHF is not to allow deduction under both sections and further, both of said sections expressly prohibits to allow deduction other than allowable under respective sections – order of Commissioner (Appeals) was to be confirmed Claim for deduction u/s. 10B - assessee have set up a new unit for production of media content software – alleged that production of a media content program on a beta-cam tape could not be equated with an article or thing and, therefore, assessee did not satisfy basic condition of manufacture and production of an article or a thing prescribed in section 10B - Held that:- Incorporeal rights contained in beta-cam tapes are 'goods' or 'merchandise' and, hence, entitled to deduction under section 10B

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• 2012 (8) TMI 697
  Capital gain – date of acquisition - deduction of section 54EC – Held that:- Period of holding a capital asset should be deemed to include the period for which the asset was held by the previous owner of the property referred in the Sub-sec.(1) of Sec.49 of the Act - none of the authorities below considered the matter in the light of the provisions of section 49(1) – matter remanded Disallowance of Municipal tax, Govt.conversion fee and Mandal Development cess tax as cost of improvement – Held that:- Expenses claimed as cost of improvements are Municipal tax, Land conversion and Mandal development cess tax, which cannot be said to be expenditure incurred for the improvement of or addition to the asset. Municipal tax is revenue in nature to be paid year after year, whereas the Govt. Conversion fine and Mandal Development cess tax are levied by the local authority for converting the land and develop the area, where the property is located - expenses also cannot be said to be for the additions or for the improvement of the asset - assessee’s appeal is partly allowed for statistical purposes

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• 2012 (8) TMI 696
  Unconditional grant - Voluntary and unconditional grant received by the assessee for protecting image and goodwill of the holding company - taxable as business receipt or not – Held that:- Payment was voluntary or that it was an unconditional payment, will not make it a capital receipt not chargeable to tax. The stand of the Assessee before the Revenue authorities that BMIL was in losses and the payment in question was made to recoup such losses is contrary to the material on record. There was holding and subsidiary company relationship between BMIL and BMG besides business relationship viz., BMIL was using the brand image of BMG, making use of the technical know-how of the parent company and was also acting as the marketing agent for BMG for sale of diagnostic products, BIO chemicals and Bio catalysts. It is only because of such relationship and also in the light of the help rendered by BMIL in terms of protecting and promoting the interests of BMG in the wake of COMSAT incident, the payment in question was made by BMG and was therefore a payment connected with the business of BMIL and was liable to be taxed u/s.28(i) read with Sec.2(24) of the Act; Whether claim of depreciation is mandatory in nature – AO noticed from the schedule of depreciation furnished by the assessee that depreciation was being claimed on the WDV without adjusting for depreciation allowable for A.Y.s 1995-96 & 1996-97 in the hands of erstwhile BMIL - BMIL did not opt to claim depreciation for the assessment years 1995-96 & 1996-97 although assets have been used in the business carried on by BMIL during those years – Held that:– Making of a claim and the furnishing of particulars – have to be read as cumulative conditions. If either of the two conditions are not fulfilled the AO cannot force the depreciation allowance on the assessee - in the absence of a claim by the assessee the allowance cannot be thrust upon him even if the particulars are available to the AO. Therefore, the mere fact that the assessee did not make a claim for depreciation places a fetter upon the powers of the AO to allow depreciation Whether software development product expenses is allowable as revenue expenditure u/s. 37(1) – expenditure for acquiring and implementing software programme known as known as ERP package MFG Pro-version – Held that:- Nature of the software and its role in business of the assessee have to be considered - matter remanded to AO for fresh consideration Computation of profit u/s. 115JA – Held that:- P&L Account prepared by the assessee for the purpose of 115JA of the Act has been duly certified by the Chartered Accountant. There is no complaint that the same is not in accordance with provisions of part II & Part II of Schedule VI of the Companies Act 1956. As rightly pointed out by the assessee the only restriction in 115JA(2) is regarding the depreciation which has to be in conformity with the method adopted under Companies Act. There is however, departure in section 115JB(2) of the Act which provides that the accounting policies and accounting standards adopted while preparing P&L Account for section 115JB of the Act should correspond to the one adopted for the purpose of Companies Act 1956

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• 2012 (8) TMI 695
  Deduction under section 80-IB of the Income-tax Act - Profits and gains from industrial undertakings other than infrastructure development undertakings – Assessee industrial undertaking had received storage charges - Held that:- Source of income with regard to storage charges was not business of assessee, but was failure of buyer to receive delivery of goods in compliance with terms of contract, it could not be treated as profits of undertaking for purpose of section 80-IB Disallowance of expenditure claimed for foreign travelling expenses in respect of one of its director and his wife – Held that:- In absence of any material contradicting claim made by company, merely because she was wife of a director, her travelling abroad could not be treated as pleasure trip and said expenditure on foreign travel was to be treated as business expenditure

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• 2012 (8) TMI 682
  Reopening of assessment u/s 147 - return of income was processed u/s 143(1) - receipt under multi-party settlement agreement signed including Schneider Electric S.A. (SE) has been claimed to be capital in nature - Held that:- As decided in Rajesh Jhaveri Stock Brokers P. Ltd. (2007 (5) TMI 197 - SUPREME COURT ) that income escaping assessment in the case of an intimation under sec. 143(1)(a) is covered by the main provision of sec. 147 as substituted with effect from 1-04-1989 and failure to take steps under sec. 143(3) will not render the AO powerless to initiate re-assessment proceedings when intimation under sec. 143(1) has been issued - If the AO has cause or justification that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment and the expression "reason to believe" cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion - the assessee vide letter dated 27.11.2007 had submitted details of agreement between the assessee and TE on the basis of which AO came to the prima facie belief that the amount received by the assessee of Rs. 12,12,18,990/- was taxable as revenue receipt and not as capital gains , thus it is neither the case of change of opinion nor there is re-appraisal of the material available on record - no infirmity in the order of the CIT(A) confirming the reopening of assessment - against assessee. Assessing the receipts from a joint venture agreement with a French company - "Profits and gains of business or profession" OR "Capital gain" - the assessee contested that Schneider had incorporated a wholly owned subsidiary company in India in contravention of Press Note No.18 of 1998 - Held that:- The serious disputes arose between TE/Schneider on one hand and the assessee and CS on the other hand, which were subject matter of legal proceedings initiated by the parties against each other in various Courts. The Joint Venture Agreement intended to put an end to disputes and legal proceedings by amicable global settlement on the terms and conditions set out in the agreement. By virtue of Joint Venture Settlement Agreement the assessee recognized and acknowledged SE/SEI as owner of patents, designs and trade marks. SE/SEI agreed to exit from joint venture and were accepted as legal successor of TE/TC. It was jointly agreed to put an end to legal proceedings as well as their outstanding commission, if any agreed and to any claim/s or potential claim/s in relation thereto. The assessee company agreed not to use the name "Telemecanique" or "TE" or similar words, its logo, trade mark, copy right and design relating to artistic work - The entire joint venture agreement is in respect of legal disputes between the assessee and joint venture partner. Therefore, it is incorrect on the part of the assessee to say that the payment has been received by the assessee for giving no objection under Press Note No.18 of 1998 - Such disputes arose in 1989 whereas the Press Note No. 18 was issued on 14th December, 1998 - Joint venture settlement agreement was entered mainly to put end to all litigations between the parties. Press Note 18 played only a role of a catalyst to expedite the settlement. The clause of the letter dated 24th April, 2003 clearly indicates that there as no impairment of source of income. The assessee's engineers and work force was competent enough to produce Indianized product competing with that of the wholly owned subsidiary company set up by the collaborator. Moreover, the assessee had acquired high level of technical know-how in the manufacture of the products. If the assessee was deprived of the technology, the business would have collapse. Therefore, it cannot be said that profit earning apparatus was affected in any way. Therefore, the compensation received cannot be treated to have been received for impairment of source of income. The Tribunal has power to assess the income correctly. If income is assessable as business income, the compensation should be assessed as revenue receipt liable to be assessed as business income. Therefore the Revenue could have taken the additional legal plea at any time for assessing the compensation received by the assessee - against assessee.

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• 2012 (8) TMI 681
  India-UK DTAA - income on account of slot chartering - taxable u/s 44 B OR 28 to 43 - Held that:- Section 115VB includes slot charter agreements in the phrase "operating a ship", section 115-VI draws a distinction between "operating ….... ships" on the one hand and "other ship related activities" such as slot charters on the other. Therefore "slot charters" are not considered as "operating ….... ships". In other words, a slot charter is considered to be a ship related activity but not the activity of "operating ….... ships" - On clarifying that section 115VI does not lead to the exclusion of slot charters from the ambit of the phrase "operation of ships" in Article 9 of the DTAA. Nor does section 115VB include them within the phrase in the DTAA. Chapter XII-G is of no assistance in this regard as the definitions therein appear to be for the purpose of the Chapter alone unless otherwise required. Article 9 (1) refers to "Income ... from the operation of ships ... ". Section 44B refers to profits and gains of "the business of operation of ships". The ambit of the identical phrases "operation of ships" in section 44B and Article 9(1) is the same. This conclusion is not arrived at by plucking out the three words from both the provisions and comparing them de hors the context in which they are used in the respective provisions. They are used in a similar context namely in the context of "income" [(as used in article 9(1)] or "profits and gains" (as used in section 44B) from the operation of ships. Both the provisions relate to the same subject namely taxation. The comparison between Article 9(1) and section 44B is, therefore, apposite and in accordance with the mandate of Article 3(3) of the DTAA. The words not having been defined in the DTAA must be given the meaning which they have under the laws of India relating to taxes which are the subject of the Convention. Thus as income from slot hire agreements fall within section 44B they must be held to be within the ambit of Article 9(1)- As a result of the view it is not necessary to consider the submissions as to the manner in which an international treaty must be interpreted. We are of the opinion that Article 9 of the Indo-U.K. DTAA includes slot charters/slot hire agreements as availed of and utilized in these cases - in favour of the assessee

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• 2012 (8) TMI 680
  Denial of registration u/s 12AA - Held that:- It is well settled legal proposition that the registration proceedings u/s 12A r.w.s. 12AA are not to be confused with the assessment proceedings wherein the provisions of section 11, 12 and 13 are applicable - In the present case CIT invoked only the provisions of section 11, 12 and 13 for the purpose of denial of grant of registration u/s 12AA , thus, it is clear that the impugned order is founded to be on irrelevant provisions of section 11, 12 and 13 , which are operative and relevant in the course of assessment proceedings as provisions of section 12A and 12AA are material and relevant, for the purpose of granting registration u/s 12AA - order of CIT is set aside and he is directed to grant registration to the assessee society - in favour of assessee.

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• 2012 (8) TMI 679
  Disallowance of commission expenses - Held that:- It is settled law that if the assessee claimed deduction of any expenditure the burden of proof is on the assessee to establish that such expenditure was incurred wholly and exclusively for the purpose of assessee's business. In the present case it is an admitted fact that there is no written agreement between the assessee and the recipients of the commission agents. Even if there is no written agreement, the assessee could claim deduction for the expenses provided if it is established with documentary and cogent evidence that such expenditure was incurred for the purpose of its business. The assessee could not even produce any correspondence between the parties which could have served as a contemporaneous circumstantial evidence. The assessee is not able to correlate the commission payments with reference to the nature of service rendered by the recipient of the commission - the person/party to whom the payment by cheque is alleged to have been made has his own story to tell and which story is believed - against assessee.

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• 2012 (8) TMI 678
  Addition on disbelieving the income from agriculture - Held that:- There is no dispute with regard to the factum of agricultural activities carried out by the assessee, though there is minor difference with regard to the land holding of the assessee and CIT(A) was not justified in not admitting the additional evidence sought to be filed by the assessee for the first time before him, notwithstanding the objections of the AO in the remand report, which are too technical to brush aside the very validity of the certificates filed - If there is any doubt about the competency or the technical knowledge of the persons who issued the certificates in question, the same could have been got verified or the assessee could have been asked to produce similar certificates from the competent Revenue authorities - set aside the impugned order of the CIT(A) and restore the matter to file of the AO for fresh consideration duly considering the additional evidence - in favour of assessee for statistical purposes. Addition on unproved credits - Held that:- Since the address of the creditor given in the confirmation letter is that of the USA and it is beyond verification by the Indian Income tax Officers and in view of the statement of the assessee that the said creditor has returned to India, and the assessee would be in a position to establish the genuineness of the transaction, duly establishing identity of the creditor and his creditworthiness, in the interests of justice it just and proper to set aside this issue for adjudication - restore the matter to the file of AO for fresh adjudication - in favour of assessee for statistical purposes. Disallowance of expenditure on car - asset used for both personal land professional purposes - Held that:- This is a case where provisions of S.38(2)will apply where any building, machinery, plant or furniture is not exclusively used for the purposes of the business or profession, the deductions shall be restricted to a fair proportionate part thereof which the AO may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession - estore the matter to the file of the assessing officer, for re-consideration - in favour of assessee for statistical purposes.

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• 2012 (8) TMI 677
  Operational income received from lessee - business income OR house property ? - Held that:- The prime object of the assessee under the said agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month in addition to the security free advance covering the entire cost of the said immovable property, thus the income derived from the said property is an income from property and should be assessed as such - There is nothing on record to suggest that the assessee has exploited the IT Complex as a business venture. The object in the Memorandum and Articles of Association of the assessee by itself cannot be an indicated to determine the nature and character of income. there is clear intention of the assessee to lease out the property for an initial period of 9 years and to extend the lease period further after expiry of the initial lease period, it cannot be said that the assessee has exploited the commercial asset temporarily. In view of the leasing out of the property for a long period the income has to be classified as income from house property. Therefore,no infirmity in the order of the lower authority - aginst assessee.

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• 2012 (8) TMI 676
  Disallowance of expenditure towards labour and metal charges - CIT (A) reduced disallowance from 15% to 5% - Held that:- Considering the consistent stand of the assessee that contract work executed by it for AY under dispute involved laying new roads which require more expenditure towards labour charges and metal purchases unlike he earlier assessment year where the assessee under took repairs of existing roads, thus the CIT (A) has correctly observed that it is not possible to obtain vouchers for this type of expenditure and they have to be allowed on a reasonable basis - as the assessee had declared 11.5% which appears to be reasonable considering the nature of work executed by the assessee direction of CIT (A) to restrict the disallowance at 5% on total expenditure - in favour of assessee. Disallowance of departmental recoveries - CIT (A) deleted the addition - Held that:- The recoveries were made by the government departments towards quality control charges in case of every contractor and the assessee has also produced evidence before CIT (A) relating to the recoveries made by the department on consideration of which the CIT (A) has allowed deduction claimed by the assessee - No reason to interfere with the finding of the CIT (A) on this issue - in favour of assessee. Disallowed u/s 40A(3) - Held that:- It is an accepted practice in such nature of contract works that payments are made either daily or weekly to the labourer's through team leader (mestri) and such payment is recorded in single entry in cash book as it is simply not possible to make entries for payment made to each labourer as they are large in number. However, in reality, the payment made is an aggregate payment made to each labourer, if considered individually will be much less than Rs.20,000/-. In the aforesaid view of the matter, no disallowance u/s 40A (3)is called for considering peculiar facts of the case - in favour of assessee.

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• 2012 (8) TMI 675
  Denial of benefit of deduction u/s 80IA - assessee was operating and maintaining two industrial parks - rent received from industrial parks towards letting out a portion of the Administrative building space - Held that:- Condensing the facts clearly prove that administrative building is part of Phase I i.e., Mariner Block. In terms with the approval by the DIPP, the CBDT also issued a notification on 29/12/2005 notifying the assessee as an industrial park for the purpose of section 80IA(4)(iii) and that infrastructure development shall include common facilities for common use for industrial activity. As is clear from the letter dt. 02/08/1999 of the assessee, administrative building is part of the common facilities. For providing smooth hassle free and quality service to the tenants of industrial park, the assessee entered into an agreement with M/s Ascendas,for maintenance and management of the industrial part and they were provided space in the administrative building on charging of rent. This was done with an objective of providing world class service to the tenants of the industrial park. Thus, providing space to M/s Ascendas is part of operation and maintenance of the industrial park. The conclusion of the CIT(A) that income derived from the allocable area is only eligible for deduction u/s 80IA(4)(iii), therefore, is not acceptable - the deduction u/s 80IA(4)(iii) shall be restricted to income derived from the ‘allocable area’ only, thus the assessee is eligible to claim deduction u/s 80IA(4)(iii) on the rental income from M/s Ascendas Property Management Services (India) Ltd - in favour of assessee.

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• 2012 (8) TMI 674
  Addition u/s 68 made for purchases disbelieved on ground of alleged inability of assessee to prove trade creditors appearing in its books - self made vouchers - assessee being a wholesale grain merchant - Held that:- Keeping in mind the nature of business, preponderance of probability is that the purchases were from agriculturists. It would not generally be possible to obtain bills from agriculturists and therefore, the best that could be done in such circumstances was to have self-made vouchers. No defect in such self-vouchers has been pointed out. Further, application of Section 68 is called for only where any credit balance stands unproved. In present case, there were no trade credit balances at all. In view of aforesaid, dis-allowance stands deleted. Addition u/s 40A(3) - Held that:- There is no finding by the A.O. that payment made to Shri Annadurai was for any purchase at all. If Section 40A(3) has to be applied, there should be a finding that the payment was in relation to an expenditure. As long as this finding is not there, application of said Section is not called for at all. Interest dis-allowance - Held that:- As long as the credits were not questioned, interest alone could not have been disallowed. Just for a reason that partners’ current account was showing a debit balance, interest expenses could not have been disallowed. Dis-allowance made out of Cooly and Delivery charges claimed - Held that:- Defects in vouchers produced by the assessee were not pointed out. Generalised reasons for disallowances cannot stand the test of reason - Decided in favor of assessee

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• 2012 (8) TMI 673
  Validity of reopening of assessment on ground of inadmissible deduction u/s 80IB – assessee being industrial undertaking manufacturing embroidery material and doing job work of embroidery garments, claimed deduction u/s 80IB in its return, assessment of which had been completed u/s 143(3) - assessee contended change of opinion – Held that:- It is undisputed that AO had accepted the claim and the amount has been mentioned clearly in the computation form signed by the AO and appended to the original assessment order. Also, prior to the completion of original assessment on 16.5.2006, there was a proceeding initiated u/s 154 on 17.5.2006. On the face of such facts, it is difficult to believe that the AO had not formed any opinion regarding the claim of Section 80-IB deduction when he was framing the original assessment. Opinion was certainly formed though not expressed. Reopening hence not justified. On merits it is held that it is an admitted position that assessee was doing embroidery work on cloth. There is a processing which has been done on cloth when embroidery work is done. It is not a question of simple value addition. Not only has the original raw material undergone a qualitative change but in the process a number of materials have been used. The process cannot be reversed to obtain the original material back. Hence, assessee was indeed engaged in manufacturing activity and eligible for deduction u/s 80-IB – Decided against Revenue.

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• 2012 (8) TMI 672
  Addition on unaccounted income - Held that:- Considering the agreement with Shri Puratchidasan claim of the assessee is accepted on Rs. 2,50,000/- out of Rs. 5 lakhs that was the amount returned on cancellation of the agreement & that Rs. 12,000/- was the registration expenses for the agreement returned by Shri Puratchidasan. Insofar as Rs. 3 lakhs claimed as amounts returned by Shri Puratchidasan out of cash paid in 1990, CIT(Appeals) was of the opinion that fresh evidence was produced in the form of promissory notes could not be accepted as there is nothing on record to show that these promissory notes, claimed to have been issued by Shri Puratchidasan, were part of the seized records. Assessee has shown no reason as to why such promissory notes were not produced before the A.O - the CIT(Appeals) was absolutely justified for rejecting the claim of the assessee - against assessee.

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• 2012 (8) TMI 671
  Writ petitions - Undervaluation of property – Held that:- difference in the consideration of the comparable property and the apparent consideration of the property in question is less than 15%, the order under section 269 UD (1) of the said Act for pre-emptive purchase of the property in question could not have been passed - order is set aside - writ petitions are allowed

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• 2012 (8) TMI 670
  Disallowance of sales promotion expenses – Held that:- Revenue has not rebutted the fact that in the earlier years the expenditure qua the sales promotion commission was allowed and assessee has placed on record a copy of each of the assessment orders for A.Ys. 1996-97 and 2002-03, it is evident there from that no disallowance has been made in respect of expenditure claimed for sale promotion commission - disallowance deleted - Revenue’s appeal is dismissed.

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• 2012 (8) TMI 669
  Denial of benefit of deduction u/s 80HHC on the DEPB/DFRC Licenses – Held that:- While disallowing the deduction the Assessing Officer, in view of amendment to section 80HHC with retrospective effect from 1.4.1998 held that the profit on transfer of DEPB received by the assessee is covered under clause (iiid) of section 28 of Income Tax Act - As regards DEPB – CIT upheld the action of the Assessing Officer observing that the assessee had not fulfilled the relevant conditions contained in 3rd provision inserted by Taxation Laws(Amendment) Act, 2005 – matter remanded to AO - appeal is allowed for statistical purposes

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• 2012 (8) TMI 668
  Capital gain – disallowance of proportionate IPO expenses - assessee was a director-shareholder, had gone for an Initial Public Offering (IPO) of its shares during the relevant previous year and assessee sold his shares as part of this IPO - assessee's share was transferred to assessee only net of his proportionate share of expenses – Held that:- Assessee claimed his share of IPO expense as deduction under section 48(1) as part of expenditure incurred wholly and exclusively in connection with transfer of shares - Just because the expenditure was incurred based on a legal obligation would not render such expenditure as something not incurred wholly and exclusively in connection with the sale of shares - Assessee also produced Prospectus of IPO which clearly shows that assessee was obliged to meet pro rata share of IPO expenses - disallowance is deleted and assessee's appeal allowed.

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• 2012 (8) TMI 667
  Provisions of Section 260-A of the Act – Revenue contended that question of law framed at the time of admission of the appeal, quoted supra, does not constitute a substantial question of law and nor does it satisfy the rigour of substantial question of law within the meaning of section 260-A ibid – Held that:- Question of fact are binding on this Court unless it has any legal error which is not noticed and lastly, since no prayer is made by the appellant as provided in Section 260-A for either reframing the question already framed or for framing any additional questions which according to them are said to arise out of the case - appeal does not involve any question of law much less substantial question of law and what is framed as being substantial question of law do not satisfy the rigour of substantial question of law for the reasons mentioned - appeal dismissed

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• 2012 (8) TMI 666
  Depreciation allowance u/s 32 of the Act - Whether cost of assets has to be reduced by the amount of loan waived off during the year under – Held that:- Government of India waived loans - it was decided by the company to revalue its fixed assets downwards - actual cost of assets and WDV of assets for the purposes of allowances of depreciation is to be taken as per section 43(1) of the Income Tax Act 1961 - reduction done by the company in the Gross block of assets is on its own decision and on assets already capitalized in the past as well as put to use in the past - depreciation is allowable on the reduced written down value of the assets – In favor of assessee Expenses incurred for mining rights - capital expenditure or revenue – Held that:- Assessee contended that the payment to Govt. for mining rights mainly on account of mining charges claimed by assessee allowed is a revenue expenditure and are allowed as depreciation u/s 32 as intangible asset/right has not been considered by the CIT(A) - issue remanded back to the file of A.O.

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• 2012 (8) TMI 665
  Addition – profit rate - trading (gross) profit for the year at 26% as against the preceding year, where the same stood at 27.77 – Held that:- In the event of the trading results for the immediately preceding year being better than that for the current year, the assessee shall be allowed to present its case before the assessing authority by the ld. CIT(A), and adjudicate in the matter only subsequently Disallowance of the sum paid to directors of the assessee company – Held that:- where payments were made by assessee-company to its directors was supported by a Board resolution which authorised payment being in appreciation of directors' services and encouraging operational results of company, deduction should be allowed to assessee Disallowance in respect of traveling expenses - ad hoc estimates in view of the inability of the assessee to substantiate its claim in this regard in full – Held that:- In the absence of details as the reason, it stood explained by assessee before the ld. CIT(A), that the same is only by way of journal vouchers, to balance the accounts where short payments are received, so that the (personal) accounts of the business associates, being customers (oil companies) to whom cylinders are supplied, have been squared up by writing off the differences, being for minor sums – 10% of the amount is disallowd Deduction u/s. 80IA of the Act – repair or manufacture for the purpose of deduction – Held that:- Repair of cylinders - raw material and finished product is only a gas cylinder, the assessee by its processes removing the deficiency/s, as by way of welding the joints, and effecting improvements, as by way of fixing the bottom and/or the top ring - Rendering a particular thing fit for being used for which it stand already produced or manufactured, i.e., restoring it to good and workable condition, once again, is essentially a repair - assessee's activity only amounts to repair for the purpose of deduction

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• 2012 (8) TMI 664
  Block assessment - addition on account of on-money received in sale of flats which was not reflected in books of accounts – Held that:- Assessment order that the assessee filed the return of income in response to the notice u/s.158BD on 24.07.2005 - block ending on 26.03.2003 the AO was bound to serve the notice u/s.143(2) on or before 31.07.2006. The AO issued the notice under sec. 143(2) of the Act dated 30.03.2007 which is admittedly not within the time limit fixed by the proviso to sec.143(2) of the Act - in favour of the assessee

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• 2012 (8) TMI 663
  Royalty - nature - assessee acquired only a licence to use the brand name and trade marks of the foreign collaborator – Held that:- 25% of the lump sum royalty payment could be attributed to acquiring capital asset in the form of commercially valuable right to continuously use the Fenner brand name and trade mark and the balance 75% could be permissible as deduction as revenue expenditure for mere use of brand name and the trade mark. - following the decision in Southern Switchgear Limited [1997 (12) TMI 106 - SUPREME COURT] confirming the order of HC in [1983 (3) TMI 18 - MADRAS HIGH COURT] decided in favor of revenue. Applicability of provisions of section 32(1) – Held that:- Assessee has not either owned wholly or partly any know-how, patents, copy rights, trade mark, etc. so as to apply the provisions of section 32(1) - assessee is only permitted to use trade mark and brand name of the foreign collaborator with certain conditions - provisions of section 32(1) are not applicable to the facts of the assessee’s case.

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• 2012 (8) TMI 662
  Disallowance of depreciation while computing the income in accordance with the Sections 11 to 13 of the Income Tax Act, 1961 – Held that:- Similar issues were considered by Tribunal in assessee's own case wherein the Tribunal decided the issue of allowability of depreciation on the capital asset in favour – depreciation allowed

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• Customs

• 2012 (8) TMI 694
  Refund - refund claim was rejected only on the ground of limitation and the issue of bar of unjust enrichment was not being examined by the adjudicating authority – Held that:- Refund claims are within time - adjudicating authority has not examined the issue of unjust enrichment - matter remanded back to the adjudicating authority

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• 2012 (8) TMI 693
  Import of Barcode Printers - additional duty of customs under Section 3 of the Customs Tariff Act - whether the appellant are required to affix MRP – Held that:- Whether the shopping malls “which are typical buyers of the imported printers) can be regarded as institutional consumers - Shopping malls, or stockists are not similar to a transporter or a hotel - it is required under the Standards of Weights and Measures (PC) Rules, 1977 to declare on the package of the imported article its retail sale price - goods are liable to value as per provisions of Section 3(2) of the Customs Tariff Act, 1975

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• 2012 (8) TMI 661
  Confiscation of vessel and penalty imposed - alleged violation of Section 111 of Customs Act - Revenue alleged non- fulfilling of Customs formalities with regard to vessel viz no Customs permission, no immigration permission, non fulfilling of visas formalities - appellant requested to take up the matter for adjudication without issuance of SCN and also personal hearing - Held that:- Commissioner could not consider the submissions made now by the Appellants at the time of adjudication, since the Appellants had waived the show cause notice and personal hearing. The submissions made now by the Appellants are required to be considered. In these circumstances, the case is remanded to the Commissioner to consider the submissions made by the Appellants and decide the issue afresh.

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• 2012 (8) TMI 660
  Export of wooden furniture components - goods were nothing but sawn timber which is prohibited for export under the Foreign Trade Policy - appellant stated that the respondents had no mala fide intention to export the goods in violation of the export policy – Held that:- On an earlier occasion, the SIIB, had allowed a similar cargo for export and therefore, when the present consignment was entered for export, the respondents had a bona fide belief that the subject goods can be legally exported as furniture parts – order of confiscation set aside and redemption of the confiscated goods for domestic use as ordered by the original authority, but allow redemption on a reduced fine while setting aside the penalty imposed by the original authority - Department’s appeal is partly allowed

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• 2012 (8) TMI 655
  Penalty – confiscation – goods imported as unaccompanied baggage includes the fire arms viz. Air gun, pistol, cartridges etc – Held that:- Goods i.e. firearm & cartridges are restricted for import under the Baggage Rules. Thus the impugned goods being liable for confiscation have been rightly confiscated under Section 111(d) of Customs Act, 1962 and imposed penalty under Section 112 ibid - revision application is rejected

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• Corporate Laws

• 2012 (8) TMI 692
  Compensated by way of interest on the outstanding loan as ordered by CLB - from the year 1983 until the date of repayment at the rate of interest at which the funds were borrowed after adjustment for any share of profit already passed on - Held that:- the CLB could not have ordered recovery of interest over the amount advanced under the agreement dated 30.09.1983 because such an order essentially resulted in modification of the terms of the agreement between the parties; and such a modification could not have been made without the consent of the appellant company in view of clause (e) of Section 402 of the Act. Worthwhile it shall be to refer to the scheme of the relevant provisions as contained in Part-A of Chapter VI of the Act on the powers of Company Law Board for prevention of the oppression and mismanagement. The CLB, in the present case, though has ordered a fundamental modification in the terms of the agreement between the appellant company and the respondent No. 2 company but then, the consent of the appellant company, the third party for the purpose of clause (e) of Section 402, was not obtained. Neither the order impugned records so nor there is any other material on record to show that any such consent was obtained - directions to recovery of interest from the appellant company by the respondent No.2 company, is set aside CLB appears to have proceeded rather on the wrong assumption that according to the auditor's report of the year 1988-89, the appellant company was not possessing many facilities and that the facilities were not availed by the respondent No. 2 company as appears that the pronoun "it", as used by the auditor in his report, was taken by the CLB to mean as if the appellant company was not possessing many of the facilities. The report, read as a whole, makes it clear that the expression "it does not possess" referred to the respondent No. 2 company, in whose regard the audit report was being made, and not to the appellant company.

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• 2012 (8) TMI 659
  Winding up proceedings - final distribution between the secured creditors and the workers - Chartered Accountant's report that the creditors cannot claim status of secured creditor - the applicant and other creditors who allegedly hold charge against the assets of the company - particularly immovable properties - but have not got the charge registered are aggrieved by the said report of the chartered accountant. - held that:- In present case even if it is assumed that charge was created against immovable properties (as claimed by the applicant) then also mere creation of charge (assuming it was created) against immovable properties will not suffice because for present case the important requirement is the one prescribed under Section 125 viz. the charge must be registered within 30 days with the Registrar of Companies. In the cases where the company is in liquidation and payments are to be disbursed amongst secured creditors in light of the provisions contained under Section 529-A read with Section 529 of the Act, the effect of the said provision under Section 125 of the Act would be that so much of charge which is not registered in accordance with provision under Section 125 of the Act will not acquire status of, and will not be treated as, "secured charge" for the purpose of Section 529-A and Section 529 of the Act and the creditor holding such unregistered charge will not be treated and considered, to that extent, a "secured creditor" in respect of the said charge - It is also evident the Section 125 applies to every charge created by the company on or after the Ist day of April, 1914 but where the charge is by operation of law or is created by an order or decree of the court, Section 125 has no application. In present case even if it is assumed that charge was created against immovable properties (as claimed by the applicant) then also mere creation of charge (assuming it was created) against immovable properties will not suffice because for present case the important requirement is the one prescribed under Section 125 viz. the charge must be registered within 30 days with the Registrar of Companies - present application is disposed of with the clarification that OL will consider and decide the claim of the applicant and other creditors and the workers in light of the foregoing discussion and accordingly determine the disbursement ratio

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• Service Tax

• 2012 (8) TMI 719
  Demand of service tax – penalty - appellants were providing the service of cable operators - they did not pay service tax as applicable – Held that:- There is no case for imposing penalty for an amount more than net tax liability - penalty under Section 78 is reduced - penalty under Section 76 is waived - appellant is given an opportunity to pay 25% of the penalty under Section 78 in 30 days of receipt of the order

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• 2012 (8) TMI 718
  Demand of service tax under Management and Business Consultant – Held that:- Revenue has no proof that service have been provided by the Gamma Holding except the terms of the contract - no service tax to be paid for entering into a contract. Levy arises only when activities are performed - Market Research itself is needed for management of an organization cannot be reason for classifying the service as Management Consultancy considering the legal position that a service has to be classified under the heading which is more specific. Market Research may help in Management for that reason the activity of Market Research cannot be classified as Management function when both services are separately taxable - requirement for pre-deposit waived

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• 2012 (8) TMI 717
  Demand in respect of V-SAT connectivity - appellant registered as Stock Broker – Held that:- This service is provided by telegraph authority or by a person licensed under Section 4(1) of the Indian Telegraph Act - appellant are not telegraph authority or a person licensed under Section 4(1) of the Indian Telegraph Act - V-SAT connectivity charges being recovered by the appellant from their customers and sub-brokers cannot be treated as charges for lease circuit services - requirement of pre-deposit of service tax demand, interest and penalty is waived - stay application is allowed.

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• 2012 (8) TMI 716
  Penalty - delay in payment of service tax - service tax and the interest have been deposited belatedly but the penalty amount was not deposited – Held that:- No intention to avoid payment of service tax and infact for the period from September, 2004 February 2005 the service tax has been deduct and further in view of the information given by the NIIT of which the respondent is a franchise claiming that they have made out a ground claiming exemption the said explanation has been accepted by the appellate authority - ground is made out for waiving of the penalty 80 of the Act is justified - appeal is dismissed.

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• 2012 (8) TMI 688
  Demand of service tax - services provided in respect installation of meters at the premises of electricity consumers - claim of exemption benefit provided by Notification No. 45/2010-ST dated 20.07.2010 - Held that:- As the assessee is engaged in transmission and distribution of electricity after purchasing the same from U.P. Power Corporation Limited and is selling electricity to the consumer, thus for bill the consumer for electricity consumed it is essential to install the electricity meter having capacity to withstand the load provided to the consumer. Thus, any activity or service like erection, commissioning and installation of meters as also technical testing and analysis can easily be termed as the service relating to the transmission and distribution of electricity provided by the service provider to the service receiver - claim of benefit of Notification No. 45/2010-ST allowed - in favour of assessee.

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• 2012 (8) TMI 687
  Management consultancy services - reimbursement – Held that:- Service rendered by them was in the nature of Public Relation Service and was not classifiable under the definition for Management Consultancy Service. This being the position. The tax paid by them prior to 1.5.2006 itself was not due - demand issued invoking extended period of time for demanding tax on amount received as reimbursable expenses in connection with such service is prima facie not maintainable

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• 2012 (8) TMI 686
  Demand of service tax - transfer of technology by a foreign company cannot be brought within the ambit of Consulting Engineer Service – Held that:- As the service provider is a foreign company, the Finance Act, 1994 is not applicable to him and he is not liable to pay service tax

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• 2012 (8) TMI 685
  Denial of Cenvat credit – payment towards royalty – Adjudicating Authority concluded that TR-6 challan is not a valid document on which they could take credit – Held that:- Respondent is paying tax as a recipient of service - So naturally the invoice issued by the foreign collaborators would not show the service tax element - So invoice which is the normal document against which Cenvat credit is to be taken is not applicable to this situation - claim for Cenvat credit being a substantial right it cannot be denied on the basis of procedures which cannot be implemented in the facts of the case

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• 2012 (8) TMI 684
  Cenvat Credit of service tax paid on Transit Insurance and Group Health Insurance Policy services - input service – Held that:- Even though the policy covers domestic purchase, movement of goods for job work, imports, domestic sales, exports, etc., the premium paid is linked to domestic sales and exports only - Chartered Accountant submitted that in the case of exports, there is instruction of the Board that when sales are made on FOB basis, Port is the place of removal. Therefore he submitted that in the case of exports, the appellant is eligible for the benefit of service tax credit - if all the sales are made on FOB basis, they will produce evidence to that effect and further, that will not be taken into account for calculation of eligible service tax - matter is remanded to the original authority to finalize quantum of ineligible service tax in respect of ‘transit premium

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• Central Excise

• 2012 (8) TMI 691
  Denial of cenvat credit - manufacturer of steel tubular poles - Held that:- Consedering the entire process it is evident that the MS black Tube/pipes as initially procured cannot be termed as pipe/tube of specific diameter and this product cannot be sold in the market as pipe/tube which are inputs for manufacture of steel tubular pole. Thus after the processing pipe/tube a distinct product comes into being which is known in the commercial parlance as steel tubular pole which has character and was distinct from MS black Tube/pipes. This process amounts to manufacture and as such no merit in the plea of the Department that steel tubular poles cleared on payment of duty by the respective assessees were not leviable with excise duty. As the appellants used duty paid inputs for the production of their final product which was cleared to the customers on payment of excise duty & department having accepted the excise duty on the final product cannot be permitted to deny cenvat credit on the inputs used for the manufacture of the final product on such a technical plea - in favour of assessee.

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• 2012 (8) TMI 690
  Aluminium structurals - Manufacture - demand of excise duty- assessee was awarded the works for structural glazing/aluminium joinery - Held that:- The entire process of fixing the glazing system is done by fixing the aluminium section on the brackets and by sticking the glass using silicon. For this reason, semi-unitized glazing system is internationally known as sticking glazing system. - the ratio of the Mahindra & Mahindra judgment [2005 (11) TMI 103 - CESTAT, NEW DELHI] settled the dispute against the assessee. Period of limitation - appellant suppressed the fact of manufacture of aluminium structures in erecting the structural glazing system in the RMZ premises - demand is not barred by limitation Regarding quantification and extension of Cenvat – Held that:- Duty due should be quantified on the assessee producing the relevant documents and cenvat credit allowed in accordance with law - goods are liable to duty as manufactured goods - grant of benefit of cenvat credit on production of necessary documents

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• 2012 (8) TMI 689
  Cenvat credit - Whether there could be any intention to evade payment of duty on the part of the applicants when the applicants always had the credit balance in their RG 23A Part II Register even after discharging duty liability and at no point of time they paid duty from their PLA – Held that:- At the time of the search, private records were found. The assessee is not able to make out a case that the private records, which were found from the business premises - on physical verification of the inputs, such inputs were not found there - assessee is not able to dispute this finding recorded by the Tribunal in this regard - assessee is not entitled for any benefit of the credit balance available in RG 23A Part II Register inasmuch as in the present case, on the basis of the seized private records, the suppression of production was detected - in favour of the revenue.

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• 2012 (8) TMI 658
  Cenvat credit on the inputs used in or in relation to the manufacture of dutiable as well as the exempted final product - non-maintenance of separate set of accounts or records - assessee contended proportionate reversed of credit and application of retrospective amendment of Cenvat Credit Rule 6(3) by Finance Act, 2010 - Held that:- We set aside the impugned order and remit back the matter to the Commissioner Adjudication for deciding the matter afresh after taking into account evidence relating to cenvat credit and also making assessment of interest payable.

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• 2012 (8) TMI 657
  Adjournment – Held that:- Merely because the advocate is on summer vacation, it cannot be a ground for adjournment of the matter - request for adjournment is rejected Demand – personal penalty - classification - Polyurethane Moulded Foam Seat Cushion - department’s contention is that the same is classifiable under Chapter sub-heading 39263010 whereas the assessee’s contention is that the same is classifiable under Chapter 94 – Held that:- Chapter Note 1(a) of Chapter 94 which reads thus “pneumatic or water mattresses, pillows or cushions, of Chapter 39, 40 or 63.” Apparently, cushions which fall under Chapter 39 are excluded from Chapter 94 - no fault with the impugned order classifying the produce under Chapter 39 - penalty is sought to be imposed not only on the firm but also on the partners which is clearly not permissible – pre deposit waived /stayed partly.

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• 2012 (8) TMI 656
  Whether indicating the name of the manufacturer on the packaging of the product would amount to affixing a brand name or not - SSI exemption – Held that:- In respect of the packaged goods, there are statutory requirements that the manufacturer’s or packer’s name and address should be indicated on the packages of the goods under the standards of Weights & Measures Act, 1976 and the rules made thereunder. Indicating the names and address of the manufacturer on the packages cannot be construed as affixing the brand name - appellant is entitled for the benefit of exemption

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• Indian Laws

• 2012 (8) TMI 715
  RTI Act - application with the Ministry of External Affairs (MEA) about the action taken report (ATR) on a complaint made to the Central Vigilance Commission – Held that:- Disclosure of information relating to alleged charges of corruption and misappropriation of government money - allegation and/or complaint, vigilance enquiry and the enquiry reports were in respect of the Ambassador in her official capacity and related to her office and acts/omissions therein and also because all the information sought by the Appellant exists in official records already, hence the information cannot be classified as personal nor exemption be sought on that ground - since the information sought relates to allegations of misappropriation of government money, public money being at stake, the information cannot be considered as personal information and hence the information does not fall under provisions of Section 8(1)(j) of the RTI Act, 2005 - information as sought by the Appellant be provided - No authority can proceed on the assumption that an information ordered to be disclosed will be misused - mere expression of an apprehension of possible misuse of information cannot justify non-disclosure of information

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• 2012 (8) TMI 683
  Cheating the Government Exchequer by Non- Revision of Entry Fee - Fixing the price of the spectrum licence at 2001 level and permitting two companies ‘Swan’ and ‘Unitech’ which received the licence and to dilute their shares even before roll-out of their services - Shri P. Chidambaram, Finance minister has conspired with Shri A Raja in fixing the price of the spectrum at 2001 level thereby committed the offence of criminal misconduct - causing huge loss to the exchequer - Held that:- The Authority is guided by the need to ensure sustainable competition in the market keeping in view the fact that there are new entrants whose subscriber acquisition costs will be far higher than the incumbent wireless operators - A cost-benefit analysis of allocating additional spectrum beyond 10 MHz to existing wireless operators and and finding it to be appropriate to go in for additional acquisition fee of spectrum instead of placing a cap on the amount of spectrum that can be allocated to any wireless operator - Keeping in view the objective of growth, affordability, penetration of wireless services in semi-urban and rural areas, the Authority is not in favour of changing the spectrum fee regime for a new entrant. The Authority recommends that any licensee who seeks to get additional spectrum beyond 10 MHz in the existing 2G bands i.e. 800,900 and 1800 MHz after reaching the specified subscriber numbers shall have to pay a onetime spectrum charge at the above mentioned rate on prorata basis for allotment of each MHz or part thereof of spectrum beyond 10 MHz. The Internal Committee of DoT considered the above recommendations made by TRAI and its report was placed before the Telecom Commission, but Finance Secretary and other three non-permanent members were not informed of that meeting, but attended only by the officials of DoT and the report of the Internal Committee was approved by the Telecom Commission. Shri A. Raja accepted the recommendations of Telecom Commission, thus did not get in touch with the Ministry of Finance to discuss and finalise the spectrum pricing formula which had to include incentive for efficient use of spectrum as well as disincentive for suboptimal usage in terms of the Cabinet decision of 2003 - Above facts would indicate that neither Shri P. Chidambaram nor the officials of MoF had any role in the various decisions taken by TRAI on 28.8.2007, decision taken by the Internal Committee of DoT and the decision of the Telecom Commission. Shri P. Chidambaram and Shri A. Raja met on 29.5.2008 and 12.6.2008 but the Finance Secretary and Telecom Secretary had already met on 24.4.2008, had agreed that it might not be possible to charge operators already having allocation upto 6.2 MHz and the principle of equity and level playing field would require that the operators who get fresh allotment of Spectrum upto 6.2MHz for GSM too should not be charged for Spectrum upto 6.2 MHz for GSM. Therefore, the allegation that Shri P. Chidambaram had over-ruled his officers’ views and had conspired with Shri A. Raja is without any basis - Criminal conspiracy cannot be inferred on the mere fact that there were official discussions between the officers of the MoF and that of DoT and between two Ministers, which are all recorded - meeting between Shri P. Chidambaram and Shri A. Raja would not by itself be sufficient to infer the existence of a criminal conspiracy so as to indict Shri P. Chidambaram - No materials on record do not show that Shri P. Chidambaram had abused his position as a Minister of Finance or conspired or colluded with A. Raja so as to fix low entry fee by non-visiting spectrum charges fixed in the year 2001 or he had deliberately allowed dilution of equity of the two companies.

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